1981 (4) TMI 2 - SC - Wealth-tax

Whether Mapilla Marumakkathayam tarwads of North Malabar-Muslim undivided families governed by the Marumakkathayam Act (Madras Act 17 of 1939)-fall within the expression individual and are assessable to tax under s. 3 - we hold that the term individual in s. 3 of the Act includes within its ambit Mapilla Marumakkathayam tarwads and they are well within the purview of the taxing provisions of the enactment

Issues Involved:
1. Constitutionality of the Wealth Tax Act, 1957.
2. Interpretation of the term "individual" under Section 3 of the Wealth Tax Act, 1957.
3. Applicability of Article 14 of the Constitution concerning discrimination.

Issue-wise Detailed Analysis:

1. Constitutionality of the Wealth Tax Act, 1957:
The initial challenge to the Wealth Tax Act, 1957, was on two grounds:
(a) Parliament's competence to include Hindu Undivided Families (HUFs) in the charging section under Entry 86 in List I of the Seventh Schedule of the Constitution.
(b) The charging section's alleged violation of Article 14 of the Constitution.

The High Court rejected the first ground, affirming Parliament's competence to include HUFs in the charging section. However, it accepted the second ground, finding discrimination between HUFs and Muslim Mapilla tarwads, thus holding the charging section violative of Article 14. This decision was later remanded by the Supreme Court for reconsideration of the Article 14 issue with proper factual backing.

2. Interpretation of the Term "Individual" under Section 3 of the Wealth Tax Act, 1957:
The core issue was whether Mapilla Marumakkathayam tarwads fall within the expression "individual" under Section 3 of the Wealth Tax Act, 1957. The High Court judges had differing views:

- Justice Velu Pillai: Concluded that the term "individual" in Section 3 did not include non-HUFs like Mapilla Marumakkathayam tarwads. He argued that the term "individual" was used in antithesis to "Hindu undivided family," and including all undivided families under "individual" would render the specific mention of HUF redundant. He also noted that the exclusion of Mapilla tarwads did not constitute discrimination under Article 14 due to their insignificant number.

- Justice V.P. Gopalan Nambiyar: Held that the term "individual" included groups of individuals like Mapilla Marumakkathayam tarwads. However, he read down the term to exclude Mapilla tarwads to avoid differential treatment and potential violation of Article 14.

- Justice T.S. Krishnamoorthy Iyer: Argued that "individual" included groups of individuals such as Mapilla Marumakkathayam tarwads. He believed that the specific mention of HUFs did not restrict the meaning of "individual." He also stated that the classification by the legislature was rational and did not amount to discrimination.

The Supreme Court ultimately held that the term "individual" in Section 3 includes Mapilla Marumakkathayam tarwads. The Court noted that legislative practice had consistently treated Mapilla tarwads as individuals under various taxing statutes.

3. Applicability of Article 14 of the Constitution Concerning Discrimination:
The High Court initially found that the Wealth Tax Act's charging section was discriminatory under Article 14. However, upon remand and further consideration, the majority of the High Court judges concluded that Section 3 was not violative of Article 14. The Supreme Court affirmed this view, stating that the classification made by the legislature was rational and did not constitute hostile discrimination. The Court also referenced past legislative practices and judicial observations that supported treating Mapilla tarwads as individuals.

Conclusion:
The Supreme Court allowed the appeal, holding that Mapilla Marumakkathayam tarwads fall within the term "individual" under Section 3 of the Wealth Tax Act, 1957, and that the section does not violate Article 14 of the Constitution. The appeal was allowed without any order as to costs.

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